Soros, Coatue Alumni Thrive in Two-Tier Hedge Fund Business

  • Coatue alumni's $1.1 billion Sylebra fund returned 27%
  • Ex-Lone Pine Asia head's Tybourne hedge fund surged nearly 21%

Some of the hottest young Asian hedge funds, whose founders cut their teeth at firms such as Soros Fund Management and Coatue Management, are proving worthy of the billions of dollars they’ve attracted of late.

Sylebra Capital Partners, Tybourne Capital Management (HK) and Pleiad Investment Advisors were among firms that navigated turbulent markets to post double-digit returns in 2015, according to people familiar with the matter. They trounced the average 6.4 percent return for Asia-focused hedge funds last year, according to Singapore-based data provider Eurekahedge Pte.

That performance puts Sylebra and Pleiad in an elite circle of managers that can stop taking new investor money, even as many smaller hedge funds struggle to stay afloat. Their ability to weather volatility will be tested again this year, with China’s slowdown and oil’s decline making markets chaotic.

"Large hedge-fund organizations may have better risk management infrastructure than smaller ones,” said Peter Douglas, Singapore-based principal at CAIA Association, a global alternative investment education group.

Stock markets from Tokyo to Shanghai have entered bear market, with the MSCI Asia-Pacific gauge dropping 9.4 percent this year through yesterday. The MSCI Asia-Pacific Index has moved more than 1 percent for six straight days, the longest stretch since equities were rocked by the European debt crisis in June 2012.

Closing Funds

Sylebra, led by ex-Coatue managers, and Pleiad, started in 2014 by former employees at Soros, have disclosed plans to stop accepting more money after assets swelled. Their fortunes add to evidence of a widening gap between the industry’s haves and have-nots, after hedge-fund startups in Asia tumbled to a 14-year low in 2015.

Amplifying the shift toward larger funds, they’re also getting favorable treatment from the prime brokerage departments that service them, said Douglas.

"Increasingly, the prime broking community provides a de facto tiered service, with funds generating the highest fees, typically larger funds, seeing the most attractive deal and information flow, as well as pricing and terms.”

Sylebra Capital Partners Master Fund, which has about $1.1 billion of assets, returned 27 percent last year, according to a person with knowledge of the matter. That brought gross annualized performance since its October 2011 inception to nearly 23 percent, said the person, who asked not to be identified discussing private data. The global equity long-short fund from Sylebra, managed out of Hong Kong, focuses on telecommunications, technology and media companies, especially those with small to medium market value.

Asset Growth

Jeff Fieler, a former senior investment partner at Coatue, and Daniel Gibson, previously an investment partner at the New York-based technology-focused hedge fund, started Sylebra with about $25 million. The hedge fund stopped accepting more investor money in October, when assets hit $1 billion, said the person.

A hedge fund run by Tybourne Capital Management (HK) returned nearly 21 percent last year, said two people with knowledge of the matter. Led by Eashwar Krishnan, a former Asia head of Lone Pine Capital, Hong Kong-based Tybourne managed just under $3.9 billion in the hedge and a long-only funds at year-end, said one of the people. Its hedge fund holds about $2.6 billion, and has stopped taking new money.

Alibaba Bet

Performance at the Tybourne fund was partly boosted by the timely purchases of shares in Alibaba Group Holding Ltd. Tybourne bought 5 million Alibaba American depository receipts in the third quarter when the Chinese e-commerce company’s stock slumped 28 percent after trading restrictions introduced after its initial public offering expired, freeing some of its largest stakeholders to sell shares. Alibaba ADRs rebounded nearly 38 percent in the fourth quarter.

Pleiad Investments, led by former Soros Fund Management Asia specialists Kenneth Lee and Michael Yoshino in Hong Kong, gained more than 14 percent last year, said a person with knowledge of the matter. The stock picker made money from all the markets it focuses on, including Greater China, Japan and South Korea, said the person.

The firm, which boosted assets to nearly $1.2 billion after starting trading in September 2014 with just over $150 million, has said it will stop accepting capital from existing and new investors this quarter, the person said.

Macquarie Slumps

Not all large Asian funds weathered the turmoil well. Macquarie Asian Alpha Fund lost 8 percent, the second annual decline since it was started in 2005, according to its December newsletter to investors. The fund, which picks Asian stocks using computer models, has returned 8 percent on an annualized basis since inception. The Macquarie fund and accounts trading with the same strategy manage $1.7 billion, according to the newsletter.

Other winners in 2015 included the Pine River China Fund and BFAM Partners Asian Opportunities Master Fund. The Pine River China Fund returned about 15 percent for the year, said a person with knowledge of the matter.

BFAM Partners Asian Opportunities Master Fund, which has more than $1.4 billion of assets, gained nearly 11 percent last year, according to its December newsletter. BFAM, which trades equity-linked products such as convertible bonds, credit as well as equity and foreign-exchange volatility instruments, has returned a cumulative 73 percent since it started trading in June 2012, according to the newsletter.

Spokesmen for Sylebra, Tybourne, Pleiad, Pine River and BFAM declined to comment on performance, citing the private nature of their funds.

Asian funds larger than $250 million outperformed those between $50 million and $250 million in size for the third year in a row and beat peers under $50 million for the second straight year, defying conventional wisdom that smaller, more nimble investors have the highest returns, according to Eurekahedge data.

The trend may in part be a result of "the massive cost increase imposed on small managers by an increasingly tough regulatory environment,” said Alex Mearns, Eurekahedge’s chief executive officer.

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